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AnnuAl RepoRt 2018 » Malayan Flour Mills Berhad 23

Management Discussion and Analysis (cont’d)

2018

BEYONDGO

SUSTAINABILITY

Achieving greaterheights in our drive tomanage Sustainability.


AnnuAl RepoRt 2018 » Malayan Flour Mills Berhad24

TABLEOFCONTENT

25

33OUR

MATERIALMATTERS

32KEY

STAKEHOLDERS & ENGAGEMENT

INVOLVED

34 - 37BALANCED

RELATIONSHIPWITH NATURE

OURWORKFORCE &

WORKPLACEENVIRONMENT

38 - 45OPERATIONS

EXCELLENCE &GOVERNANCE

46 - 48

COMMITMENTTO SOCIETY

49 - 51

MFMGROUP

BUSINESSDIVISIONS

MFMSUSTAINABILITY

STATEMENT

2018TABLE OF CONTENT

MANAGINGDIRECTOR'SSTATEMENT

ABOUTTHIS

STATEMENT

28 - 31

26 - 27

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VISION

Our employees areresponsible to embrace

and integrate sustainabilitypractices in our Group.

This Sustainability Policy aimsto integrate a concept of

sustainable development intothe organisation’s activities toestablish and promote sound

practices.

To build a sustainablebusiness and continuously

add value to allstakeholders.

OBJECTIVE

SCOPE

Sustainability Policy

MFMSUSTAINABILITY

STATEMENT

2018ABOUT THIS STATEMENT

Our Sustainability FrameworkTo acknowledge key issues under EES, MFM Groupupholds its core values in terms of“QUALITAS”, “CONSILIUM” and “PROGRESSUS”. The approach to tackle challenges linked to establishingsolid sustainability practices is by having approvedStatement on Corporate Governance, Terms of Referenceof Board Committees, Board Charter, Whistle BlowingPolicy and Code of Conduct which are made readilyavailable to stakeholders via our Company’s website (i.e.https://www.mfm.com.my). The Code of Conduct serves toensure that all employees carry out their duties with utmostintegrity.

QUALITASProduce and provide

consumers with consistentquality products atreasonable prices

CONSILIUMUnity of employees and

management

PROGRESSUSContinuous improvement tomaintain competitiveness

and contribute effectively tobenefit the society

The well-known Plan-Do-Check-Act Cycle is incorporated into oursustainability initiative so as to continuously review policy and to takeaction for improvement. This policy will be reviewed periodically to ensure best practices by theSustainability Task Force.

SUSTAINABILITYPOLICY

GOVERNANCE

MFM CORE VALUES

BalancedRelationshipWith Nature

Our Workforce& WorkplaceEnvironment

OperationsExcellence &Governance

CommitmentTo Society


Management Approach To Sustainability

MFMSUSTAINABILITY

STATEMENT

2018ABOUT THIS STATEMENT

To comply with theregulatory requirements& standards in relationto environmentalconcerns

To raise awarenessamong our employees &the whole supply chainin order to act in anenvironmentally-responsible manner

To integrateenvironmental mattersinto our businessdecisions

To ensure that energy &water are utilisedefficiently &consumption is beingmonitored

To recycle, reduce orreuse the waste orresources wherepracticable

To reduce carbonfootprint through energyefficiency &conservation practices

To empower ouremployees by offeringtraining, motivation &career advancement

To provide a safe &healthy workplace & takecare of employees' well-being

To encourage opencommunication, ideas &innovation

To support diversity inworkforce

To provide job securityto employees

To have good strategicmanagement & wiselyutilise our resources

To advance sustainableprofitable growth whilstsatisfying our ethical,legal & contractualobligations

To abide by therequirements of all laws& industry’s bestpractices

To provide ourcustomers with safeproducts that adhere toGovernment’s legislation& requirements

To adopt good ethicalpractices through ourCode of Conduct

To ensure an appropriategovernance system is inplace to oversee thestrategic development &performance that relatesto the maintenance of asustainable business

To ensure proper riskmanagement & internalcontrol system are inplace

To engage actively withcivic project, charityevents & the localcommunities throughour corporate socialinitiatives

To help our communitysurvive & prospereconomically

To provide ample jobopportunities

Our Group has identified and prioritised key issues related to EES for our business operations as follows:

BalancedRelationshipWith Nature

Our Workforce& WorkplaceEnvironment

OperationsExcellence &Governance

CommitmentTo Society


Energy conservation plays a crucial role inlessening greenhouse effect. As one of the marketleaders in flour manufacturing and poultry industry,MFM Group aspires to reduce our carbon footprint.Conserving energy is not just about saving on theelectricity costs.

* For the purpose of reporting, we have consolidated the energy usage figures. As such, prior years' figures were adjusted accordingly to coincide with current year's presentation.

Energy consumption of our Group has increased in2018 as compared to 2017. It was mainly due toexpansion (i.e. new poultry processing plant andnew aqua feed mill), additional manufacturingprocesses for higher quality products, lower salesvolume due to supply constraint and introduction ofnew products. In the long run, with the deployment of newtechnologies in our new manufacturing processes,we will have an edge to our products by enhancingquality. We endeavour to manage a balance betweenensuring the quality of our products and minimisingenergy consumption. We will also consider cleanenergy in sustaining our businesses.

BALANCEDRELATIONSHIPWITH NATURE

Energy

Forsustainable businessdevelopment, it iscrucial for MFM Groupto maintain balancedrelationship withmother earth whereall resources comefrom.

Group Energy Usage (kWh/MT)

*All kWh data above excludes figures from joint venture company.

MFMSUSTAINABILITY

STATEMENT

2018BALANCED RELATIONSHIP WITH NATURE



* For the purpose of reporting, we have consolidated the water usage figures. As such, prior years' figures were adjusted accordingly to coincide with current year's presentation.

WaterWater is essential for life. It is our responsibility toconserve and keep our water pure and safe forfuture use.

As a major food producer, MFM Group usessignificant amount of water to produce safe andclean products. Poultry processing plant uses relatively more waterthan flour mills. In conserving water, our Group hasinvested in new wastewater treatment plant. Theincrease in water usage in 2018 was mainly due topre-commissioning cleaning works at new plants;rendering plant, reservoir and wastewater treatmentplant. Nevertheless, we anticipate the m³/MT to decreasewhen the processing plant is in full operations. Thenewly-designed processing plant also incorporatesrain water harvesting system where water is reusedfor non-manufacturing processes.

Emission

Air EmissionFor our flour and feed operations in Malaysia, airemission monitoring is conducted on ourchimney, exhaust outlet and fume hood. As stated in Malaysia Standard MS1596:2003of 4(2) Environmental Quality (Clean Air)Regulations 2014, the maximum reading is 50mg/m³. We complied with the above and ourreadings were ranging from 0.93 - 2.33 mg/m³.

Carbon Emission

Group Water Usage(m³/MT)

*All m³ data above excludes figures from joint venture company.

In caring for our mother earth, our Group takesinitiatives to cooperate with relevant parties toconduct environmental inspection every 6 monthsin our Vietnam operations. The diesel consumption of our plant operations inVietnam is tracked and CO2 emission is closelymonitored. We aspire to achieve continuous improvement inreducing carbon emission throughout ourbusinesses by incorporating innovativetechnologies.

MFMSUSTAINABILITY

STATEMENT



Wastewater ManagementThe conversion process of live chicken into safe andwholesome meat utilises water. The untreated usedwater affects our ecosystem. To conserve water for our future generation, MFMGroup invested in a new wastewater treatmentplant in 2018. It is designed using Dutch technologiesthat complied with EU Environmental Standards. All waste water is treated to achieve a minimumeffluent standard before discharging back to nature. Benefits of wastewater treatment plant:

Eliminate disease-causing bacteria and kill harmfulorganisms through filteringEnsure minimal odoursRemove up to 97% of contaminants fromused water

Dissolved Air Flotation (DAF) unit

Aeration Tank

WasteManagement

MFM Group strives to implement effective,sustainable and ecologically sound wastemanagement for many years to come. We have established standardoperating procedures (SOP) for waste disposal i.e.scrap waste, hazardous chemical waste and others.

Our poultry farming produces biological wastei.e. chicken manure. The direct application of rawmanure into plantation soil may lead toenvironmental emission such as foul odour andform a breeding platform for pests. To combat pollution of untreated poultry waste,MFM Group utilises manure composting plant. Thecomposting plant converts chicken manure into dryorganic fertiliser. Its odour filtration system contains sawdustand microorganism that reduces ammonia emissionlevel, complying with Occupational Safety andHealth (Use and Standard of Exposure ChemicalHazardous to Health) Regulations 2000. We invested in a composting plant in 2017. Movingforward, two more composting plants will be addedin 2019.

Biological Waste Management

Composting Plant

MFMSUSTAINABILITY

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MFMSUSTAINABILITY

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Offal Meal Processing Line

Feather Meal Processing Line

Organic Solid WasteManagementThe new rendering plant which originated fromDenmark was commissioned in November 2018. Itwas designed to convert chicken by-products(visceral, feathers, bones and blood) into rawmaterial for animal feeds. This state-of-the-art rendering plant is designed tokill harmful bacteria, leaving only useful protein foranimal feeds.The rendering plant will reduce impact onenvironment by:

Transforming our waste to be used as feedsProcessing by-products within hours ofharvesting before viruses and bacterial growthProducing clean protein source for animal feeds

Apart from the SOP for proper handling of chemicalwaste, our Group has training programmes onchemical waste management and disposalprocedures including “Safe Chemical Handling” forworkers. Waste oil and hazardous chemical can causeextensive damage to environment and posesubstantial hazards to the lives of animals, plantsand human beings. Our Group manages waste oiland hazardous chemical disposal properly inaccordance with the Environmental Quality Act1974.

Chemical Waste Management

MFM flour mills optimise the usage of wheat toproduce flour. Whole wheat flour uses all parts of the kernelwhereas white flour only uses the endosperm. Thebran removed is used for feed milling process toproduce animal feeds. In addition, the germ will besold or used to produce special kind of flour.

Zero Waste in Flour Milling

Bran

GermEndosperm

Anatomy of Wheat

MFM Group practises recycling activities for certainrecyclable waste (i.e. plastic drums, metal drums,unused wooden pallets and etc.) as part of ourefforts to conserve natural resources.

Recycling


MALAYSIA

Our Group values workforce diversity as one of thekey elements to achieve the Group’s vision andmission. We have a diversified workforcethat comprises different gender, age group,ethnicity and cultural backgrounds to harness themultiple perspectives of the working population.

As employeesare the mosttreasured resource inMFM Group, we aim toalways grow togetherin order to achievegreater success and tocreate a better future.

OURWORKFORCE &WORKPLACEENVIRONMENT

MFMSUSTAINABILITY

STATEMENT

OUR WORKFORCE & WORKPLACE ENVIRONMENT 2018

Our People At A Glance

Our People Regionally

VIETNAM

INDONESIA

Our Gender Profile2018

63%MALE

37%FEMALE

2018

3,140people

In 2018, our Group employed 3,140 people acrossour businesses.

Our Age Group2018

*Data excludes foreigners.

*Data excludes foreigners.

9 %Gen Z:22 & below

48 %Gen Y:23 - 38

35 %Gen X:39 - 54

8 %Baby Boomers:55 & above



Talent Acquisition

EmployerBranding

StrategicPartnership Sourcing Selection

MFM aims to be a leadingfood manufacturing

enterprise in the region. Weleverage on technology andvarious digital platforms toattract, develop and retainthe best employees in the

industry.

MFM strives to continuouslyestablish and maintain

strategic partnerships withuniversities and schools tofoster the development of

young talents in society andbuild the talent bench of

MFM.

In order to maintain asuccessful recruitmentstrategy, MFM adopts a

smart sourcing strategy inrecruiting the right talentsand creating a rewarding

career journey for ourcandidates.

A series of psychometricassessments are used toassist in hiring the rightcandidates for the right

positions.

“WE MAKE WORK FUN BYMAKING IT FUN AT WORK”

MFMSUSTAINABILITY

STATEMENT


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MFM always puts workplace safety and employee health as the first priority. Weequip related employees with proper Personal Protective Equipment (PPE) toprotect them from physical hazards at the worksite. Health surveillance wascarried out for employees in accordance to Department of Occupational Safetyand Health (DOSH) requirement. To create a healthy and safe working environment, we comply with laws andregulations, provide continuous and consistent trainings to related employees andestablish Health, Safety and Environment (HSE) divisions to oversee thesematters.

Safety & Health

Our Safety & Heath Officers are present toconduct regular checks to ensurecompliance with statutory regulations,procedures and practices. They investigateany safety and health related incidents thathappen in the workplace, conduct safetycampaigns and provide individualcounselling on safety and health relatedmatters.

Safety Officer

We comply with the Occupational Safetyand Health Act (OSHA) 1994, Factories &Machinery Act 1967 and their regulations.Our poultry farm reinforces ourcommitment towards OSHA by developingOccupational Safety & HealthAdministration Manual and implementingHazard Identification, Risk Assessmentand Risk Control (HIRARC).

Compliance

In 2018, we did not receive any penaltiesrelated to occupational safety and healthfrom relevant authorities. There were noworkplace fatality cases in our Group.

Zero Penalty & Fatality

Trainings

Basic Occupational First Aid Training Cardiopulmonary Resuscitation (CPR)Training Authorised Entrant and Standby Personfor Confined Space (AESP)Authorised Gas Tester and EntrySupervisor for Confined Space RefresherFire Prevention and ExtinguisherTraining Working at Height Awareness Emergency Response Team RefresherTraining & Chemical Spillage TrainingSafe Handling of Chlorine Gas Safe Driving Forklift Training Fire Drill Usage of Drench Shower & Eyewash LOTO (Lock Out Tag Out) Training Noise and Hearing ConservationTraining Manual & Chemical Handling Training Safety and Health Manual LiftingTraining N95 Mask Training

MFMSUSTAINABILITY

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To provide ourcustomers with safeand high qualityproducts that adhereto legislation andrequirements.

Developing a healthy relationship with customers iscrucial to understand customers' needs in order toimprove our products and services quality. MFMGroup deploys Customer RelationshipManagement (CRM) system to manage customers’feedbacks. We value and safeguard customer data and privacyas company asset. In 2018, MFM Group did notreceive any complaints concerning breaches ofcustomer privacy.

OPERATIONSEXCELLENCE &GOVERNANCE

Products & ServicesResponsibility

MFMSUSTAINABILITY

STATEMENT

2018OPERATIONS EXCELLENCE & GOVERNANCE

Customer Relationship

Our Commitment to Food Quality& Safety

MFM products are FREE from:

Customer complaint related to food safety issues:

MFM products are certified by:

- Any visible metal fragments- Salmonella and Aflatoxin; yeast and mould

JAKIM (Department of Islamic Development Malaysia)as HALAL, complying with Islamic dietaryrequirements.

Strictly controlled to be not more than 5 casesper year.



Certifications & Trainings For Food Quality & Safety

Flour Aqua Feeds

FlourMilling

PoultryFarming

PoultryProcessing

FeedMilling

Hazard Analysisand CriticalControl Points(HACCP)FSSC22000:2005SIRIMHALAL (certifiedby JAKIM)

Hazard Analysisand CriticalControl Points(HACCP)Veterinary HealthMark (VHM)ISO 22000:2005ISO 9001:2015GoodManufacturingPractices (GMP)HALAL (certifiedby JAKIM)

Compliance toDepartment ofVeterinaryServicesmyGAPCertificate (fromthe Ministry ofAgriculture andAgro-basedIndustry)MSISO/IEC17025 &ILAC-MRA(outsourcedtestinglaboratory)Skim AkreditasiMakmal Malaysia(SAMM) (externaltesting laboratoryfor drinking watersamples forchicken)

Hazard Analysisand CriticalControl Points(HACCP).Fish QualityCertificate (by theDepartment ofFisheriesMalaysia,complies with theEuropean Unionrequirement asstated underRegulation 5(1) ofthe Fisheries(Quality Controlof Fish for Exportto the EuropeanUnion)Regulations2009)

CE

RTI

FIC

ATI

ON

STR

AIN

ING

S GoodManufacturingPractices &Personal HygieneBriefingFood HandlerTrainingFSSC 22000AwarenessTraining

HACCP Awareness, Food Hygiene, FoodSafety and GMP Awareness CourseInternal Auditor Training

Food Handler Training and Understanding& Implementation of HACCP

In 2018, we did not receive any monetary value of fines or non-monetary sanctions for non-complianceto laws and regulations.

Poultry

Quality Assurance& Control TrainingmyGAP (MalaysianGood AgriculturalPractice) Training

VHM

HACCP

HALAL

GMP

ISO 9001:2015

CERTIFIED

ISO 22000:2005

CERTIFIED CERTIFIEDCERTIFIEDCERTIFIED CERTIFIED

MFMSUSTAINABILITY

STATEMENT



Bio-securityMFM Group's poultry farm and hatchery facilitiesare equipped with bio-security facilities. Bio-security is the most effective and efficient way ofprevention and disease control.

Our farms are cared by professional and qualifiedveterinarians who monitor flock health, carryout diagnosis, provide treatment prescription andconduct R&D. Strict bio-security measures prevent infestationor disease in farms, thus, protecting theenvironment and our workforce. The closed house system allows chicken housetemperature to be regulated. This reduces birdstress, lowers bird mortality and improves farmperformance.

Code of Conduct & EthicsWe instill high standards of professional and ethicalconduct in all employees. Integrity helps us to earnthe trust and respect of the people we serve.

The Company's Code of Conduct sets out theethical standards to all employees in their dealingswith fellow colleagues, customers, shareholders,suppliers, competitors, the wider community andthe environment.

We uphold our reputation and high standards byliving the Code of Conduct. This will help us toachieve the highest possible standards across ourbusinesses within the MFM Group.

Anti-CorruptionOur Group has a Whistle Blowing Policy andprocedures are in place.

In 2018, MFM Group did not have legal actionspending or completed related to anti-competitivebehaviour.

Anti-CompetitiveBehaviour

MFMSUSTAINABILITY

STATEMENT



Annual Dinner

Company Trip

Company Anniversary Celebration

Women's Day Celebration

Camp Day

English Class For Staff

Team Synergy Training

MFM holds theresponsibilities notonly to consistently provide high qualityfood to people, butalso to give back tosociety.

MFMSUSTAINABILITY

STATEMENT

2018COMMITMENT TO SOCIETY

COMMITMENTTO SOCIETY

Corporate SocialResponsibilityTowards Workplace

Annual football match held for employees topromote healthy lifestyle and to strengthen the

bond between employees.

Annual Football Match

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